Executive summary
The IRS issued tax relief for Hurricane Ian victims throughout both North Carolina and South Carolina. Certain filing and payment deadlines starting on or after Sept. 25, 2022 in South Carolina and Sept. 28, 2022, in North Carolina, and before Feb. 15, 2023, will be postponed to Feb. 15, 2023. The guidance also provides for special treatment of gain/loss recognition for taxpayers experiencing casualty loss.
Detailed analysis
Extended due date – filing and payment relief
The IRS issued further guidance granting relief to those taxpayers in North Carolina and South Carolina affected by Hurricane Ian. This relief is similar to the relief offered to those taxpayers in Florida. Refer to our prior alert for Florida. Affected taxpayers will likewise have until Feb. 15, 2023, to file various individual and business tax returns and to make tax payments. The relief includes individuals and households that reside or have a business anywhere in both North Carolina and South Carolina. Refer to “Help for victims of Hurricane Ian” webpage for the latest updates and prior news releases pertaining to Florida.
The relief postpones various tax filing and payment deadlines that occurred on or after Sept. 25, 2022, for South Carolina, and Sept. 28, 2022 for North Carolina. Affected individuals and businesses will now have until Feb. 15, 2023, to file returns and pay any taxes that were originally due during this period. This includes taxpayers with valid extensions to file their 2021 returns that will run out on Oct. 17, 2022. The relief does not include payments related to these 2021 returns because those payments were due on April 18, 2022.
The Feb. 15, 2023, due date also applies to quarterly estimated income tax payments normally due on Jan. 17, 2023, and the quarterly payroll and excise tax returns normally due on Oct. 31, 2022 and Jan. 31, 2023. In addition, in South Carolina, penalties on payroll and excise tax deposits after Sept. 25, 2022, and before Oct. 11, 2022, will be abated as long as the deposits are made by Oct. 11, 2022. In North Carolina, penalties on payroll and excise tax deposits after Sept. 28, 2022, and before October 13, 2022, will be abated as long as the deposits are made by Oct. 13, 2022.
The Feb. 15, 2023, due date further applies to businesses with an original or extended due date falling within the postponement period. This includes calendar-year corporations whose 2021 extensions will run out on Oct. 17, 2022. This also includes tax-exempt organizations, including for 2021 calendar-year returns whose 2021 extensions will run out on Nov. 15, 2022.
The IRS relief includes other time-sensitive actions described in section 301.7508A-1(c)(1) and Rev. Proc. 2018-58; filing Form 5500 series returns due on or after Sept. 25, 2022 for South Carolina, Sept. 28, 2022 for North Carolina and before Feb. 15, 2023; and transferors who are not affected taxpayers but who are involved in a section 1031 like-kind exchange pursuant to section 17.02(2) of Rev. Proc. 2018-58.
State conformity
The above relief applies to federal filing, paying and other federal time-sensitive acts. Most states do not automatically conform to federal disaster relief provisions. Those actions are often in the form of executive orders as required under state statutes, affirmative actions by the revenue authority or require taxpayers to take affirmative actions to request further extension. Taxpayers should monitor their respective state revenue authorities for developments.
Casualty losses
In addition to extensions of time to file tax returns and complete certain actions, presidential disaster declarations offer taxpayers special options with respect to gain/loss recognition. Taxpayers who experience a casualty loss in a presidentially-declared disaster area may qualify to recognize losses in the year prior to the year the casualty actually occurred under section 165(i). Taxpayers who realize gains by receiving insurance proceeds in excess of basis may be able to defer gain recognition by reinvesting in qualified property under section 1033. Some of these actions are time sensitive, so taxpayers are encouraged to contact their tax advisor to take advantage of the full range of relief options
Automatic penalty relief
The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.
Relief for those impacted outside the disaster area
The IRS will also work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.
The IRS published a frequently asked questions page that may provide further information on specific questions related to disaster relief.
